Of Crowds and Rationalism in the Markets

Folks like Melvin Capital and Citron Research think that GameStop is a dying business. The general public is optimistic though, be it for fundamental reasons (e.g. Ryan Cohen (chewy.com) will help GameStop can re-invent itself in the online space ), or for personal amusement, or FOMO. In particular, /r/wallstreetbets members are buying lots of call options . Or maybe it’s rage against the financial machine.

The Tulip Bulb Craze

Virus causes colored stripes in tulip petals. The Dutch valued such bulbs. Prices rose (just when one thought they couldn’t go higher). Let the tulipmania begin.

Tulip bulbs options. 20 for a bulb currently worth 100. If the price moved to 200, the option holder exercises his right: buys at 100 and simultaneously sells at 200, making a profit of 80.